What Is Driving Zimbabwe’s Record-Breaking Bitcoin Binge?

There is a curious occurrence happening in the country of Zimbabwe whose sovereign currency itself has withered due to hyperinflation. The Zimbabwean dollar has become practically worthless, and the country has been employing the use of the American US dollar for its transactional needs.

With the onset of Bitcoin and other cryptocurrency, the financial landscape has seen a shift of interest in the Zimbabwean economy with Bitcoin growing in popularity from something that was used speculatively to becoming a currency increasingly common in its usage. Even businesses like car dealerships are now accepting Bitcoin as a method of payment.

Their uniquely dysfunctional economy has made way for the Bitcoin cryptocurrency to surge drastically.

Safe Haven

Zimbabwe is going through a currency crisis. Its president Robert Mugabe announced the decision to completely ditch the Zimbabwean dollar in 2008 and move the economic system of the country towards utilizing the US Dollar but there is now a severe shortage of the US currency in Zimbabwe, which has led to their banks actually rationing the withdrawals people are allowed to make.

There was an unsuccessful attempt at introducing bonds that will be equal to the US currency in value but black market transactions and other illegal activities led to inflation in their price. Plus the bonds can only work within the country; no foreign suppliers will accept them as a means of payment.

Zimbabwe’s strict regulations on capital have led to importers looking towards more creative solutions. Enter Bitcoin.

Bitcoin faces no regulations on behalf of the central bank in Zimbabwe so importers are looking towards it as a prime alternative. They are willing to pay a premium for Bitcoins and it has risen to a point where it functions as a common currency in Zimbabwe now.

It is obvious that if a country’s own financial system is unreliable for the people and causes them more problems than it can solve, they have to look towards a form of payment system that can relieve them of the government regulations acting as strict intermediaries.

What Will Happen

Considering that the government of President Mugabe is quite the authoritarian one, it is possible that the government of Zimbabwe will follow suit with China’s regulatory stance on cryptocurrencies and ban all trading done within the country with Bitcoins in order to maintain their control. The only thing that could stop that from happening is the fact that the government might be lacking in sufficient resources to enact such a ban nationwide.

There is a more optimistic speculation as well. The government might see this as a lucrative opportunity and take full advantage of it. It does not seem likely that the Zimbabwean dollar is seeing a revival any time soon but if the prospects of Bitcoin can somehow help them reestablish a proper economic system in the country, they might actually revise their policies to have a more proactive role in cryptocurrency trading. In a nation which has gone through with the absurdity of implementing a complete ban on importing fruits, it is not so strange to consider the possibility of them actually utilizing Bitcoin as a national currency.